Managing your risk, creating value: The role of Internal Audit and emerging technologies

Transcription

1 Internal Audit. Expected More. Managing your risk, creating value: The role of Internal Audit and emerging technologies Xavier Potier Director, Risk Assurance Services 13 th April 2018

2 With us today Internal Audit Risk Management Internal Control Corporate Governance Insurance, Manufacturing, Consumer, Logistic, Big 4 Firms CEO, CFO, Financial Controller, Legal, Risk Advisor Different level of risk management and Internal Audit experience / expertise France, Denmark, Belgium, Singapore, Vietnam Industry Financial Services Public Sector 2

3 Agenda Setting the scene What does the market say? How talent and technology can help Internal Audit? 3

4 Section 1 Setting the scene 4

5 The foundational concept of Risk Management Enterprise Risk Management (ERM) is as "a process, effected by an entity's board of directors, management and other personnel, applied in strategy-setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives Source: COSO 5

6 The definition of Internal Audit Internal Audit is an independent, objective assurance and consulting activity designed to add value and improve an organisation s operations. It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes. Source: Institute of Internal Auditors 6

7 All successful enterprises take risks! No Risk, No Reward 7

8 Section 2 What does the market say? 8

9 Risks are changing: how and why? Today s fast changing world creates more uncertainty for organisations and makes it harder for them to understand where new risks are going to come from. 9

10 Disruption A source of challenge and opportunity The top five disruptions experienced by global companies in the last 2 years. Specifically in Vietnam, investors should beware of the following top 5 challenges Emerging country with developing regulatory landscape 58% 44% 37% Transparency and Visibility New regulation Changes in business model or strategy Cybersecurity and privacy threats Risk management awareness Changing Banking system landscape 36% Financial challenges 34% Technology advancement Adaptation of infrastructure and technology Source: PwC, 2017 State of the Internal Audit Profession Study,

11 Regulatory landscape in Vietnam Insurance Banking Securities Investment Fund Public Companies Joint Stock Companies Decree 73/2016/ND- CP Implementation of the Law on insurance business and certain amended articles Circular 50/2017/TT- BTC on guidelines for Decree 73 Law on Credit Institution 47/2010/QH Circular 44/2011/TT- NHNN on Internal Control system and Internal Audit of credit institutions, foreign bank's branches Circular 210/2012/TT-BTC guidance on the establishment and operation of securities company Circular 212/2012/TT-BTC guiding the establishment, organization and operation of fund management company Decree 71/2017/ND-CP on Corporate Governance applicable to public companies Law on Enterprise 68/2014/QH13 Draft Decree on Internal Audit 11

12 Section 3 How Talent and Technology can help Internal Audit? 12

13 What defines a strong Internal Audit in the eyes of stakeholders? Key challenges of Internal Audit in Vietnam Internal Audit maturity Compliance vs added value Potential overlap in scope of work between Internal Audit, Internal Control, Risk Management and Compliance Need for consolidation of 1 st & 2 nd line of defence Talent shortage, specifically in non-fs sectors and need for training Emerging legal framework over Internal Audit and Risk Management Confident Business knowledge Conviction Listen Communication Executive presence Mentor Flexible Respect Passion Influence Business acumen Interpersonal skills Talent development Sourcing Talent Team building Position Business understanding Adding value Proactive Stakeholder expectation Trust Mandate Courage Manage change Vision Strategic plan Collaborate Relationships Negotiate Integrity Business Alignment Motivate Unwavering Strategic thinker Need for tools and technology capabilities 13

14 The Agile IA function 18% Agile = Prepared + Adaptive of the nearly 1,900 respondents to the survey report that their internal audit function plays a valuable role in helping their companies anticipate and respond to disruptive events. We call these Agile IA functions. Distinctive behaviors 1. Build the likelihood of disruption into planning and risk assessment 2.Meaningfully collaborate with other lines of defense Distinctive behaviors 1. Create more flexible processes and reporting mechanisms 2.Drive the use of data analytics and technology 3.Invest in and elevate business and technical IQ 3.Implement flexible talent models Source: PwC, 2017 State of the Internal Audit Profession Study,

15 Key considerations for optimising the talent management Focus on mentoring and development Transform performance management 71% Of very effective leaders develop people with business acumen to create future business leaders vs. 48% of effective leaders Rethink talent acquisition strategies Re-evaluate sourcing relationships 73% 84% Of very effective leaders are agile in resourcing so as to complement the organization s strategic direction vs. 52% of effective leaders Of very effective leaders co-source to supplement internal talent vs. 59% of effective leaders Source: PwC, 2016 State of the Internal Audit Profession Study,

16 Facing a technology inflection point Internet of Things PwC s 21 st Global CEO Survey finds that the speed of technological change is a top concern among CEOs. And risk professionals must help their organizations make sure that processes and controls are effective while not slowing the pace of innovation. Drones 3D printing Robotics The essential eight emerging technologies Augmented Reality Virtual Reality Blockchain Artificial Intelligence Source: PwC, How can boards tackle the Essential Eight and other emerging technologies?,

17 Link between Technology and Talents Source: PwC, 2018 State of the Internal Audit Profession Study,

18 Level of adoption Evolutionary or Revolutionary? Leap forward when possible Today s future is tomorrow s foundation Time to adoption Collaboration tools Data tools Analytics Automation Predictive Source: PwC, 2018 State of the Internal Audit Profession Study,

19 Evolvers Successfully fusing Technology and Talent Use advanced technology collaboration tools and rate well in cost optimization 90% Technology Talent 73% Invest specifically on technology training Utilize analytic and monitoring tools 82% Evolver Traits 72% Have correct mix of technology, operational and financial skills Experiment with predictive risk indicators 28% 66% Have team members with advanced technology skills Source: PwC, 2018 State of the Internal Audit Profession Study,

20 Action to take today! Assess where Internal Audit stands with its technabled foundation Fuse technology and talent into a single strategy Consider revolutionary over evolutionary whenever possible Source: PwC, 2018 State of the Internal Audit Profession Study,

21 Discussion Discussion PwC Vietnam Eurocharm 21

22 Appendices 22

23 PwC s 2018 State of the Internal Audit Profession Study PwC s 14 th Annual State of the Internal Audit Profession Study More than 50 stakeholder and CAE interviews conducted across North America, Europe, Australia, Africa and Asia to gain further insights. Europe 2,500+ survey respondents, including CAEs, CFOs, Audit Committee members, and more than 1,200 stakeholders across 92 countries North America Africa Australia Asia Click here to access the full report 23

24 Internal Audit & Risk Management International Standards The International Professional Practices Framework (IPPF) is the conceptual framework that organizes authoritative guidance promulgated by The IIA. A trustworthy, global, guidance-setting body, The IIA provides internal audit professionals worldwide with authoritative guidance organized in the IPPF as mandatory guidance and recommended guidance. The COSO Enterprise Risk Management-Integrated Framework is one of the world s most widely used risk management frameworks, developed by COSO coordinated with PwC. 24

25 The PwC Global Network is at your service Imagine the power of more than 236,000 people sharing a common purpose: building relationships that create value for you and your business. This is PwC. Every day, our people work with you to build the value you are looking for. PwC is one of the world s largest providers of advisory, assurance, tax and legal services. Our work with leading companies across multiple industries helps make business happen in over 158 countries around the world. PwC Global Ranked Number One Financial Consultants Globally Kennedy s Financial Consulting Marketplace, PwC Vietnam Tax Controversy Leaders International Tax Review, PwC Vietnam Vietnam Audit Firm of the Year Acquisition International, 2016 PwC Vietnam Offices Ho Chi Minh City 8th Floor, Saigon Tower 29 Le Duan Street, District 1 Ho Chi Minh City, Vietnam Telephone: Ha Noi 16 th Floor, Keangnam Hanoi Landmark Tower 72 Pham Hung Street, Nam Tu Liem District Hanoi, Vietnam Telephone:

26 PwC Risk Assurance Services Risk Assurance Services Help you make well-informed decisions The world of risk is changing. Challenging economic times, volatile world events and fast-changing technology are leaving organisations more vulnerable than ever. It s much harder to predict where new risks will come from. But, you are adapting and so have we, helping the world's leading businesses to create value in a turbulent world. Many organisations have processes in place to manage risk. But, they are often not as robust as they need to be or they are more focused on yesterday s risks rather than being forward looking. Our view is that boards need to start taking a holistic approach to risk, moving from being reactive and compliance-driven to being proactive, and using risk as a strategic driver of performance. Risk Assurance helps management make well-informed decisions. The insight and independent assurance we bring provides an invaluable safeguard in today s complex operating environment. We look at your processes, policies, systems and controls with a fresh eye. Internal audit, Business Resilience, Business Control Advisory, Performance Assurance, Corporate Treasury and Commodity Solutions - We cover it all with a focus on the details of your risks. Explore further IT risk assurance Internal audit Corporate treasury and comodity solutions Cybersecurity & data privacy services Business control advisory Business resilience Performance assurance PwC's Academy 26

27 Thank you for your kind attention! Xavier Potier Director, Risk Assurance Services Tel: Ext DID: This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it PwC (Vietnam) Ltd. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details.